The Palestinian Authority is spending more than $5 million per month in salaries for 5,500 convicted and alleged terrorists imprisoned in Israel -- payments that defy congressional rules for U.S. funding to the PA, according to a new report from an Israeli research institute.

Palestinian Media Watch released a report last week that found that all Palestinian and Israeli minority Arabs in Israeli prisons for terror acts have been legally receiving a monthly salary from the PA under a new law passed in April that simply “formalizes what has long been a PA practice.”

“The U.S. funds the PA’s general budget. Through the PA budget, the U.S. is paying the salaries of terrorist murderers in prison and funding the glorification and role modeling of terrorists,” the report reads.

The average salary of a prisoner is greater than Palestinian civil servants – prisoners on average receive $3,200 a month compared with $2,800 for civil servants.

The U.S. government provided nearly $600 million to the PA last year, including $225 million in direct budgetary assistance to the PA, the report stated. But the PA’s new law may violate congressional rules for providing financial aid to the region.

Under a 2010 funding legislation that lays out the rules for supplying money to the West Bank and Gaza, the secretary of state “shall take all appropriate steps to ensure that such assistance is not provided to or through any individual, private or government entity, or educational institution that the secretary knows or has reason to believe advocates, plans, sponsors, engages in, or has engaged in, terrorist activity,” according to the report.

The State Department, which oversees foreign aid, did not return numerous messages seeking comment.

Hussein Ibish, a senior fellow at the American Task Force on Palestine, dismissed the report as an “attempt to change the subject by raising a practice that is longstanding and not objected to by the Israeli government.”

Ibish said the Palestinian Authority has been providing stipends to all Palestinians imprisoned by Israel since the administrative organization was founded in 1994.

“That includes some people that I would consider terrorists and some people that I wouldn’t,” Ibish said, explaining that the money largely goes to the families of the prisoners – most of whom are detained for nonviolent offenses -- to fulfill a sense of obligation.

“The PA has taken the implicit position that none of them are terrorists or it doesn’t matter if they are because their families need money,” he said. “It’s a gesture of solidarity not with one particular prisoner but a whole category of prisoners.”

Itamar Marcus, the director of Palestinian Media Watch, presented the report to members of the Republican Israel Caucus last week in an effort to persuade U.S. lawmakers to cut the funds off to the PA.

“I cannot support sending millions of American taxpayer dollars to such an organization; especially when they are currently paying salaries to over 5,500 terrorists sitting in Israeli prison,” Rep. Trent Franks said in a statement to FoxNews.com.

“No American funds to the West Bank were ever to be made available for the purpose of recognizing or otherwise honoring individuals who commit (or have committed) acts of terrorism,” he added. “This disgraceful waste of taxpayer dollars is an affront to freedom and an insult to Israel, the most precious ally America has in the world.”

Marcus told FoxNews.com that other members were also upset about the report and that some of them are working on legislation to address the issue.

On the same day that he spoke to the caucus, the Republican-controlled House introduced a foreign aid bill that would restrict President Obama’s authority to provide U.S. funds not only to the Palestinian Authority, but also to Pakistan and Egypt and cuts money for international organizations.

But Marcus said he doesn’t support that bill because he says it gives the false impression that Palestinian Authority Chairman Mahmoud Abbas is not part of the problem. Until Abbas ends the practice of honoring terrorists who kill Israelis with summer camps and school names, Marcus said, there can never be peace.

The report comes as the Palestinian Authority pushes for formal recognition of an independent state from the U.N., which will vote on it in September. Israel and the United States object to the move, saying Palestinian statehood should only be achieved through peace talks, which have been stalled for three years.

“We want to have a peace process that is not just technical but educational,” Marcus said. “That’s why funding is critical. The Palestinian Authority can’t move forward without U.S. political and financial support.”

But Ibish said Marcus’s report is confusing the cause of the decades-old “bloody and brutal” conflict with the effect of it, which he says supports settlers’ goal of never ending the Israeli occupation of areas that Palestinians want for their future state.

“It’s been the job of supporters of occupation to change the subject. That’s what this is,” he said. “It’s not an irrelevant issue, it’s a secondary one. It’s an effect, not a cause.”